US ISM Services PMI expected to post a mild uptick in the services industry
- The US ISM Services PMI is expected to edge higher to 50.7 in October, indicating modest expansion in the sector.
- Investors will pay attention to the employment and inflation components of the PMI survey.
- EUR/USD technical outlook suggests the bearish bias remains intact in the near term.
The Institute for Supply Management (ISM) is scheduled to release the October Services Purchasing Managers’ Index (PMI) on Wednesday. The report, which is a well-trusted measure of business performance and is widely seen as a leading indicator of economic activity, is expected to reflect a mild expansion in the services sector.
Because of the postponement and cancellation of key macroeconomic data releases due to the ongoing US government shutdown, the ISM Services PMI report could significantly influence the valuation of the US Dollar (USD) in the near term.
What to expect from the ISM Services PMI report?
Markets expect the publication to show a modest expansion in the services sector’s business activity, with the headline ISM Services PMI edging higher to 50.7 in October from 50 in September.
Previewing the report, TD Securities analysts said, “We look for the ISM surveys to move higher in October, following mostly disappointing outcomes in the summer.”. “ISM services should partially walk back its 2pt September drop. Respondent views and the ISM's employment components will garner attention,” they added.
In September, the Employment Index came in at 47.2 and remained below 50 for the fourth consecutive month, reflecting a steady decline in the service sector’s payrolls. Following the October policy meeting, Federal Reserve (Fed) Chairman Jerome Powell acknowledged that the job creation was low but added that they did not see the weakness in the job market accelerating. Regarding the interest rate outlook, Powell said that another rate cut in December was “far from assured.”
Meanwhile, the inflation component of the PMI survey, the Prices Paid Index, remained above 69 for three consecutive months, reflecting strong input inflation for the sector.
According to the CME FedWatch Tool, markets are currently pricing in around a 67% probability of a 25-basis-point (bps) Fed rate cut in December.
Economic Indicator
ISM Services PMI
The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector, which makes up most of the economy. The indicator is obtained from a survey of supply executives across the US based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that services sector activity is generally declining, which is seen as bearish for USD.
Read more.Next release: Wed Nov 05, 2025 15:00
Frequency: Monthly
Consensus: 50.7
Previous: 50
Source: Institute for Supply Management
The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector, which has historically been a large GDP contributor. A print above 50 shows expansion in the service sector’s economic activity. Stronger-than-expected readings usually help the USD gather strength against its rivals. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are also watched closely by investors as they provide useful insights regarding the state of the labour market and inflation.
When will the ISM Services PMI report be released and how could it affect EUR/USD?
The ISM Services PMI report is scheduled for release at 15:00 GMT on Wednesday.
In case the headline PMI comes in above 50 as expected, and there is a noticeable recovery in the Employment Index toward or above 50, investors could turn reluctant to bet on a Fed rate cut in December. In this scenario, the USD could continue to gather strength, causing EUR/USD to push lower.
Conversely, a disappointing PMI print, combined with either a weak Employment Index figure or a significant decline in the inflation component, could revive expectations for further policy easing and weigh on the USD, allowing EUR/USD to stage a rebound.
Eren Sengezer, FXStreet European Session Lead Analyst, offers a brief technical outlook for EUR/USD: “EUR/USD’s near-term technical outlook points to a buildup in bearish momentum. The Relative Strength Index (RSI) indicator on the daily chart continues to decline toward 30, while the 20-day Simple Moving Average (SMA) extends its slide after completing a bearish cross with the 50-day and the 100-day SMA.”
“On the downside, 1.1400 (static level) aligns as an interim support level before 1.1320 (200-day SMA) and 1.1050 (Fibonacci 50% retracement of the January-September uptrend). Looking north, resistance levels could be spotted at 1.1600 (20-day SMA), 1.1670 (50-day SMA, 100-day SMA) and 1.1800 (static level, round level).”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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